Fundamentals in office and home sectors firming, says DBS

By PC Lee / The Edge Singapore | January 15, 2018 10:05 PM SGT
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SINGAPORE (Jan 15): Recent trends and transactions show fundamentals in the office and residential property sectors are firming up, says DBS Group Research.
In the office sector, DBS says tenants are continuing their “flight to efficiency” as better office specifications and connectivity encourage tenants to relocate.
For example, major completions in 2018 such as Frasers Tower and Robinson Towers have already been taken up, with the yet to be completed Frasers Tower with 634,000 sf is 70% leased.
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Rendering of redevelopment of former Robinson Towers
Redevelopment of former Robinson Towers at Robinson Road (Credit: Kohn Pedersen Fox Associates
According to lead analyst Derek Tan in a Monday report, the substantial leasing out as major new supply entering the market in 2018 are major positive developments for the sector.
Gross rent for Frasers Tower is understood to have appreciated by 10%-15% over the past year.
The increase should boost Grade A rents for newer office buildings.
"We believe this will be a catalyst for Frasers Centrepoint Limited and office REITs (Suntec REIT and Keppel REIT) to rally further," says Tan.
In the residential sector, developer SingHaiyi announced it had won the tender for Park West Condo en bloc with a $841 million bid.
This is the first major en bloc acquisition for the year.
Inclusive of differential premium, the winning bid works out to be $850 psf ppr. This is 44% higher than the West Coast Vale GLS (Government Land Sales) site acquired by China Construction in early 2017.
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Tan says the property could potentially be redeveloped into more than 1,700 units from the current 436 units.
The site is 600m to 700m away from Clementi MRT station and Clementi Mall although there is no mention about the traffic study at this point.
The estimated breakeven is close to $1,350psf, above the average prices of properties around the vicinity transacted in the past one year at $1,240psf, including The Trilinq with ASP of $1,221 psf and Parc Riviera with ASP of $1,253 psf.
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The analyst expects supply in the area to build up given two GLS sites with one land tender are expected to close end of Jan 18.
This story, written by PC Lee for The Edge Singapore, first appeared on Jan 15.

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